The performance of Ghana stock exchange for the period 2000 to 2009

Abstract

Stock markets play a crucial role in financial development; however, the ability of stock markets to play the role that is ascribed to them depends upon the presence of market efficiency and hence the performance of the market. The essence of this paper is to estimate the performance of the capital market as Ghana is striving to attain middle income status. Using Eviews statistical software we computed market volatility, liquidity of returns and serial correlation of returns using cross – sectional data. We also took into consideration the effect of inflation on the determination of performance of the market. The finding was that the market over the period under review performed well in terms of liquidity and volatility of the market. It was also established that in the determination of market efficiency the effect of inflation is an important factor one has to consider. That could be the reason why market efficiency in most developing countries turns out to be inefficient. This is simply because of the high rate of inflation in these countries. It is recommended that in determining market efficiency or the performance of the capital market we need to work with real data rather than nominal data. Key words: Ghana stock exchange, volatility, liquidity, real returns and nominal returns.